Accelerating renewable development through transmission investment

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AEMO’s inaugural Integrated System Plan (ISP), which was presented to the COAG Energy Council in August, delivered on a key recommendation of the Finkel Review and provided an outlook to 2040 on the expected needs of the NEM, including recommended transmission investment to support secure, reliable, and affordable energy supply as the generation mix evolves. Transmission planning, particularly in relation to renewable energy zones (REZs), has become increasingly topical, and the NSW government has recently launched its  strategy  to develop $2.5 billion worth of high voltage transmission assets to accommodate new energy projects. The Clean Energy Council has calculated that the renewable energy projects either underway or about to start in NSW alone will require a $4.2 billion infrastructure investment and deliver almost 2000 direct jobs, suggesting that a carefully implemented transmission infrastructure strategy could be the impetus for significant economic growth and regional development within that jurisdiction.

As reported in Renew Economy, MHC recently hosted a CEDA event during which a panel of stakeholders discussed the challenges of new transmission investment (summarised here). The ESB will soon report  on implementation of the ISP’s Group 1 near-term projects, on progression of Group 2 medium-term projects, and on any modifications to existing processes that may be necessary for these projects to be delivered. While these findings may be informative to stakeholders, they will not, on their own, present an imperative for action, nor a new investment mechanism to deliver the identified transmission infrastructure. The AEMC is currently preparing its final report in relation to its review of coordination of generation and transmission investment, having published five options for how the ISP could be implemented that vary according to the role of the TNSP and/or AEMO in determining transmission investment. While the AEMC has stated that it is considering how the RIT-T process and test could be adapted to fit the current environment, many would characterise this regulatory test as  ‘designed for a different time, when steady and predicable demand growth would drive incremental system growth’.

With the ISP lacking a clear pathway for implementation, stakeholders cannot rely on a coordinated process for developing renewable energy zones. As demand from connection proponents grows and jurisdictional governments seek to meet policy objectives around economic growth, regional development, and securing new energy investment, new investment models for transmission infrastructure are emerging. Among the various options and permutations, the key components of these investment models relate to:

  • Firmness of transmission capacity access
  • Means by which rights to access new transmission capacity are allocated within the market
  • Nature of any accompanying obligations imposed on the recipients of access rights and/or government support

The components may be varied according to the risk appetite of TNSPs and renewable project developers, as well as the extent to which a jurisdictional government may seek to play a role in the allocation of new transmission capacity and development of renewable energy projects.

MHC believes there is an opportunity to lead with the application of these models, potentially providing a pathway and investment mechanism for the development of the REZs identified in the ISP.

Please contact either Paul Minnock for further information on these innovative commercial models for the development of transmission infrastructure.